AT&T secures license to operate in Indonesia

RogerCheng

NEW YORK (MarketWatch) -- U.S. telecom operator AT&T Inc.
T, +1.99%
said Wednesday it has secured a license to operate in Indonesia, providing the telecommunications giant with a new catalyst to grow its enterprise business in Asia.

AT&T is the first foreign telecom operator to be granted a license in Indonesia. Previously, the company had to sell its service in partnership with local providers. A license allows AT&T to provide service directly to companies in the country, which can provide a boost to revenue and margins because the company doesn't have to share the pie.

The license underscores the importance of overseas operations as a growth driver. It also illustrates a trend of countries easing their regulatory controls over business. Wider access for U.S. telecom firms means a shot in the arm for their business units, which still face a stagnant market at home.

AT&T typically provides multi-national corporations with business services such as virtual private networks, business applications and network access. Through the new license, the company plans to offer Internet phone service and managed networks to global companies in Indonesia.

"You're seeing a general trend in the region where countries are making moves to open up," said Roman Pacewicz, senior vice president of marketing and global strategy for AT&T. "Any Asian market is a market we look closely at and evaluate."

AT&T could potentially look to Thailand and Vietnam, which are other fast-growing markets that have recently loosened their regulatory stances.

The Asia-Pacific business, which AT&T doesn't break out, is the second-largest global region with an annual double-digit growth rate over the past five years.

In comparison, AT&T's total business revenue in the second quarter fell 4.5% to $9.3 billion, although its more advanced services, such as Internet protocol, showed growth. The company has been pushing to replace its older legacy phone and Internet connection revenue with advanced Internet-based services.

AT&T has about 80 multinational customers in Indonesia now. But the process of billing and selling services was complicated and cumbersome because of the partnership arrangements. Pacewicz said he believes the licenses could potentially allow the company to grow its customer base there.

The company went through a two-year process of filing for a license and enduring an audit process to get the license. It also had to make some commitments for investments in the country, although the company declined to specify what they were.

The granting of a license has in the past resulted in a stronger foothold in that country and a spark in revenue growth. After AT&T was granted a license to operate in India in 2006, the company saw revenue jump 60% the following year. Since then, revenue in the country has grown in the double-digit rate, although India is among the countries seeing the fastest growth. The company also received a license to operate in Malaysia last year.

AT&T's entrance could mean more competition for local telecom providers in Indonesia including Indosat (ISAT.JK). But Pacewicz said that AT&T will only be going after the larger global companies, leaving the local businesses to the domestic providers.

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